The Impact of Monetary Policyon the Exchange Rate [electronic resource] : Evidence From Three Small Open Economies / Jeronimo Zettelmeyer.
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TextSeries: IMF Working Papers; Working Paper ; No. 00/141Publication details: Washington, D.C. : International Monetary Fund, 2000Description: 1 online resource (45 p.)ISBN: 1451856172 :ISSN: 1018-5941Subject(s): Central Bank | Exchange Rate | Monetary Conditions | Australia | Canada | New ZealandAdditional physical formats: Print Version:: The Impact of Monetary Policyon the Exchange Rate : Evidence From Three Small Open EconomiesOnline resources: IMF e-Library | IMF Book Store Abstract: This paper studies the impact effect of monetary policy shocks-identified by the reaction of three month market interest rates to policy announcements-on the exchange rate in Australia, Canada, and New Zealand during the 1990s. The main results are that (1) on average, a 100 basis point contractionary shock will appreciate the exchange rate by 2-3 percent on impact; (ii) seemingly "perverse" reactions of the exchange rate to monetary policy are mainly attributable to reverse causality; (iii) in a few instances, there were true "perverse" reactions of exchange rates to policy- generally, appreciations following expansionary shocks.
This paper studies the impact effect of monetary policy shocks-identified by the reaction of three month market interest rates to policy announcements-on the exchange rate in Australia, Canada, and New Zealand during the 1990s. The main results are that (1) on average, a 100 basis point contractionary shock will appreciate the exchange rate by 2-3 percent on impact; (ii) seemingly "perverse" reactions of the exchange rate to monetary policy are mainly attributable to reverse causality; (iii) in a few instances, there were true "perverse" reactions of exchange rates to policy- generally, appreciations following expansionary shocks.
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